Mortgage Jargon

Your Guide to Mortgage Industry Terms

Mortgage Jargon Buster We at Cheap Mortgages UK have provided below a handy guide to the various mortgage terms and what they mean!

APR — This stands for Annual Percentage Rate. It takes into account all fees and other costs in connection with the mortgage as well as the lender's interest rate. The APR is intended to help you compare the terms offered by different lenders and all lenders must quote an APR in addition to the actual rate of interest applied annually to your mortgage.

ADVANCE or LOAN — This is the actual amount of money that we agree to lend you.

BRIDGING LOAN — A temporary loan which enables you to complete the purchase of a new home if you have to do this before completing the sale of your existing house.

CAPPED RATE — This is a mortgage that is arrnged for a set period of time which can go up and down with variable rates but ther is a maximum (capped) rate which it cannot go above.

CASHBACK — A cash payment you receive when you complete a mortgage. It may be a fixed amount or a percentage of the amount of the mortgage.

CHAPS — This is an acronym for Clearing House Automated Payment System in other words a Telegraphic Transfer of money from one account to another.

COMPLETION — The final part of the home buying process. This is when the funds for your new home are released through the solicitor to the vendor.

CONCLUSION OF MISSIVES - Scotland Only — When the vendor and seller become legaly bound to continue with the property buying process.

CONVEYANCING — This is the name for the legal process which transfers ownership of a property from one owner to another.

DISBURSEMENTS — These are the fees that your solicitor is legaly bound to pay. They include; Land Registry Fees, Search Fees and Stamp Duty.

EARLY REDEMPTION CHARGE — If you redeem (i.e. pay off in full) a mortgage before a specified date you may be asked to pay an early redemption charge in order to recover any losses or costs incurred by your lender as a result.

ENDOWMENT — A life insurance investment policy that is designed to produce a lump sum to pay off an interest only mortgage. There is no guarantee that an endowment will generate enogh to pay off the mortgage at the end of the term.

EQUITY — This term refers to the amount of money left over in your property when any outstanding mortgage amounts have been paid off.

FREEHOLD — The term used to indicate ownership of a property and the land on which it stands where both belong to the owner indefinitely.

GROSS — A term used in connection with a sum of money from which tax has not been deducted e.g. mortgage interest before tax relief is deducted.

HIGH PERCENTAGE LOAN FEE — A fee charged by your lender when you borrow more than 75% of the valuation or purchase price of your new property. The fee is used to buy a Mortgage Indemnity Guarantee. (see below)

LEASE — If you do not own a property or piece of land outright you will have a lease agreement on it. It allows you to use or live in the property for a set length of time. Most newer properties will have a 125 year lease.

LEASEHOLD — The term used to describe the arrangement by which property is let by lease by a landlord to a tenant for a fixed period of time.

MISSIVES — The formal written offer to purchase and the acceptance (Scotland only).

MORTGAGEE — A building society or bank which lends money against the security of a charge over the property purchased (i.e. us as the lender).

MORTGAGOR — The person who borrows money, usually to buy a property (i.e. you as the Borrower).

MORTGAGE INDEMNITY GUARANTEE (MIG) — An insurance policy which protects your lender if you default on your mortgage and your lender has to repossess the property and sell it for less than the outstanding loan. The insurance policy will not protect you if your property is taken into possession and sold for less than the amount you owe.

NEGATIVE EQUITY — This is where the money you owe on the mortgage is greater than the vlue of the property.

NET — A term used in connection with a sum of money from which tax has been deducted e.g. mortgage interest after tax relief has been deducted.

REGISTERED LAND — Land for which title is registered and recorded at HM Land Registry, the central registry of the title to property in England and Wales.

REPAYMENT — Your monthly payments are partly to pay the interest on the amount you borrowed and partly to repay the outstanding mortgage. Also known as a capital and interest mortgage.

RESERVATION FEE — If you wish to take out a special offer mortgage (fixed, capped or discounted rates), a reservation fee may be charged to cover any extra administration involved and the special arrangements required to secure the funds.

SASINES REGISTER FEES (SCOTTISH LAND REGISTER) — Fees paid to the Register of Scotland to register ownership of a property.

SEALING FEE (or VACATION FEE) — A fee charged by the lender for sealing the deeds following repayment of a mortgage.

SEARCHES — Enquiries made at the Land Registry, the Land Charges Register and Local Authorities to ensure there is nothing to cause concern about title to land.

STAMP DUTY — A tax on any property, paid by the buyer at the point of completion. There is currently no stamp duty on properties below £120,000

TERM — Usually over 25 years, the time that your home loan is to be repaid.

TITLE — This signifies you as the legal owner of the property.

TITLE DEEDS — These documents show who owns a particular property.

VALUATION — A lender will need to have a property valued in order to know how much to lend the home buyer.

VALUATION FEE — This is paid to the borower for the lender's inspection of the property to find out how much it is worth in the current market.

VARIABLE RATE — This refers to the interest fluctuation rate on a loan - if you have a variable mortgage the repayments can go up and down when the Base Rate does.

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